Blue Shield relents on proposed rate increase

INSURANCE

Published 4:00 am, Thursday, March 17, 2011

Photo: Lea Suzuki, The Chronicle

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Kerry Abukhalaf of Alameda looks through a file she keeps of her medical insurance paperwork while her son Mazen, 3, plays nearby on March 8, 2011 in Alameda, California. Abukhalaf has received notice that the insurance premium for her family will be increased by 53.4%. less

Kerry Abukhalaf of Alameda looks through a file she keeps of her medical insurance paperwork while her son Mazen, 3, plays nearby on March 8, 2011 in Alameda, California. Abukhalaf has received notice that the ... more

Photo: Lea Suzuki, The Chronicle

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Letters to Kerry Abukhalaf informing her of an increase in her insurance premium since 2009 are seen on March 8, 2011 in Alameda, California. Abukhalaf has received notice that the insurance premium for her family will be increased by 53.4%. less

Letters to Kerry Abukhalaf informing her of an increase in her insurance premium since 2009 are seen on March 8, 2011 in Alameda, California. Abukhalaf has received notice that the insurance premium for her ... more

Photo: The Chronicle

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Kerry Abukhalaf of Alameda spends time with her son Mazen, 3, at home on March 8, 2011 in Alameda, California. Abukhalaf has received notice that the insurance premium for her family will be increased by 53.4%.

Kerry Abukhalaf of Alameda spends time with her son Mazen, 3, at home on March 8, 2011 in Alameda, California. Abukhalaf has received notice that the insurance premium for her family will be increased by 53.4%.

Photo: The Chronicle

Blue Shield relents on proposed rate increase

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Blue Shield of California has abandoned a push to raise health care premiums starting May 1 for individual and family members in the wake of bad publicity over the hikes.

The San Francisco insurer infuriated many individual policyholders by increasing rates in October, again in January and then again this spring. The highest cumulative increases, had they all gone into effect, would have been nearly 87 percent for some customers.

"We wanted to change the conversation to what's driving premium increases, and we're willing to take the financial risk to absorb this $35 (million) to $40 million in revenue we're going to lose," said Tom Epstein, a Blue Shield vice president and spokesman, referring to the cost of withdrawing the May 1 increase.

The decision means the next possible rate hike for many of Blue Shield's 340,000 individual and family policyholders would be in January. Individual members' rates could go up earlier if they move to a new region, add a family member or move into a higher five-year age group.

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California Insurance Commissioner Dave Jones said he was pleased by Blue Shield's decision.

"There's no question the year-after-year, double-digit increases that have been inflicted upon California consumers and California businesses are unsustainable," Jones said in a conference call with reporters. "My hope is the other insurers will note what Blue Shield has done and act accordingly."

Double-digit increases

Other insurers have also proposed hikes. Last month, Anthem Blue Cross slapped some of its individual customers with double-digit increases. That came just a year after the company reignited the debate over health care reform when it attempted to raise rates by as much as 39 percent.

The state Department of Insurance asked Anthem, Blue Shield and two other insurers that have proposed rate hikes this year - Aetna and PacifiCare - to hold off on those increases for 60 days to allow the department to review their rate filings. Blue Shield initially refused to delay the increases, but complied after the other insurers agreed to hold off.

Wednesday's decision by Blue Shield makes its review unnecessary, but the department continues to look at the other insurers' filings. PacifiCare said it is confident that its proposed increases, which ranged from 2.5 to 9.1 percent, will take effect. Aetna, which has filed for a 2.8 percent bump, and Anthem declined to comment.

The state Department of Insurance must review the rates but has no power to reject them unless officials find errors - a fact consumer advocates want to change. A bill that would create that authority is currently before the Legislature.

Most of the rate increases were originally scheduled to go into effect by April 1, but insurers will be required to give members a 60-day notice once the state's reviews are complete. Blue Shield hit customers with rate increases in October that averaged more than 18 percent. In January, the insurer followed with rate changes prompted by the federal health legislation and a state law that prevented it from charging women more for coverage. That raised rates for some, but lowered them for others.

Only one dropped

Blue Shield's most recent increase, which was originally scheduled to go into effect March 1 and the company said averaged 6.5 percent, is the only one that will not be imposed.

Consumer advocates were pleased by the decision, but said the state insurance commissioner needs the power to reject or approve rates, especially before 2014 when the major elements of the federal health law take effect.

While Blue Shield members welcomed the reprieve, they say the cumulative effect of the previous rate increases has already hit them hard.

"The additional jump was frosting on the cake, but we were already struggling with the increases to begin with," said Kerry Abukhalaf, 36, who has seen her family's Blue Shield policy increase 83 percent in three years. The proposed May 1 change would have raised them even higher.

Abukhalaf, of Alameda, said she plans to shop around for lower-cost coverage, but she's not confident the premium trajectory will change anytime soon.

"Whether it's today or tomorrow," she said, "these increases are still going to be there."

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